Realtor.Com: Expect Inventory to Increase in 2018

Legacy Title wants to keep you updated on everything happening in the housing market. Thanks to websites like Realtor.com, we can gather information to forecast downfalls or growth in the housing market.

Realtor.Com: Expect Inventory to Increase in 2018

If you’ve been following the real estate market locally and nationally, you know the story is the lack of available houses to buy. Inventory is low, especially in the Albany area. In the third quarter, inventory levels were down 16.9 percent across all markets (single family, condos, townhouses) in the Capital Region compared to the third quarter of 2016.

Danielle Hale, the chief economist at realtor.com, didn’t have a lot of specifics about our area, but according to realtor.com’s housing forecast, “national inventory levels will trend into positive territory for the first time since 2015.” That means more people will put their existing homes on the market, and builders will be producing more new houses.

Hale predicts a small growth in sales for the Capital Region – just .75 percent increase from 12,000 single family home sales to 12,100. Prices will make a bigger jump, Hale said, the median price will go from $207,000 to $212,500 – 2.55 percent.

Realtor.com made price growth predictions for the country’s 100 largest metropolitan areas, Albany is #79. By Albany, we mean the Albany Metro Statistical Area, which is Albany, Schenectady, Rensselaer, Saratoga and Schoharie counties)

Five Housing Trends for 2018:

Inventory begins to increase

Beginning in August 2017, the U.S. housing market started to see a higher than normal month-over-month increase in the number of homes on the market. Based on this trend, realtor.com projects U.S. year-over-year inventory growth to tick up into positive territory by fall 2018, for the first time since 2015. Inventory declines are expected to decelerate slowly throughout the year, reaching a 4 percent year-over-year decline in March before increasing in the early fall, after the peak home-buying months. Boston, Detroit, Kansas City, Nashville, and Philadelphia are predicted to see inventory recover first. The majority of this growth is expected in the mid-to-upper tier price points, which includes U.S. homes priced above $350,000. Starter homes are expected to take longer to recover because their levels have become so depleted by first time buyers.

Slowing price appreciation

Home prices are forecasted to slow to 3.2 percent growth year-over-year nationally, from an estimated increase of 5.5 percent in 2017. Most of the slowing will be felt in the higher-priced segment as more available inventory in this price ranger and smaller pool of buyers forces sellers to price competitively. Entry-level homes will continue to see price gains due to the larger number of buyers that can afford them and more limited homes available for sale in this price range.

Millenials gain market share in all home price segments

Although millennials will continue to face challenges next year with rising interest rates and home prices, they are on track to gain mortgage market share in all price points, due to the sheer size of the generation. Millennials could reach 43 percent of home buyers taking out a mortgage by the end of 2018, up from an estimated 40 percent in 2017. With the largest cohort of millennial expected to turn 30 in 2020, their homeownership market share is only expected to increase.

Southern markets will lead in sales growth

Southern cities are anticipated to beat the national average in home sales growth in 2018 with Tulsa, Okla.; Little Rock, Ark.; Dallas; and Charlotte, N.C.; leading the pack. Sales are expected to grow by 6 percent or more in these markets, compared with 2.5 percent nationally. The majority of this growth can be attributed to healthy building levels combating the housing shortage. With inventory growth just around the corner, these areas are primed for sales gains in years to come.

Tax reform is a major wildcard

At the time of this forecast, both the House and Senate had bills up for consideration, because neither had passed at the time they were not included in the forecast. Both proposed tax changes had provisions that are likely to decrease incentives for mobility and reduce ownership tax benefits. On the flip side, some taxpayers, including renters, are likely to see a tax cut. While more disposable income for buyers is positive for housing, the loss of tax benefits for ownership could lead to fewer sales and lower prices with the largest impact on markets with higher prices and incomes.